Control. No automaker wants to manage all aspects of its product’s life cycle more than Tesla. First, the upstart electric carmaker skirted the traditional franchise dealer network, electing to sell its own cars at Tesla-branded stores. Now, it has quietly maneuvered to take those cars back and sell them once again in its own Pre-Owned program.
Tesla recently added a Pre-Owned program to sell used Model Ss through its website and at its stores. The program operates much like the certified pre-owned programs of its more combustion-centric peers. The electric vehicles in the program are subjected to a 200-plus point inspection, and the cars come with a four-year, 50,000-mile limited warranty in addition to the remainder of the eight-year battery and drive warranty that already comes with new models (125,000 miles for the 60 and unlimited miles for 85 models). Buyers also get a CarFax history report and roadside assistance during the warranty period. The program is offered in Atlanta, Chicago, Cleveland, Denver, Florida, Hawaii, Los Angeles, New York, the San Francisco Bay Area, Seattle, and Washington, D.C. Thus far, only the newer Model S is offered; the original Lotus-based Roadster is not.
Why launch a pre-owned program?
In purely business terms, a pre-owned program allows Tesla to control the secondary market for its vehicles. This is especially important now that the all-electric automaker has shifted its S lineup higher in the premium market (the automaker has yet to release its lower priced Model 3, which was announced in 2014). At the low end, the Model S 60 has been replaced by the more powerful all-wheel-drive Model 70D, which increases the brand’s base price from $69,900 to $75,000. The flagship is now the $105,000 P85D, which arrives with the benefit of all-wheel drive to appease those in less friendly climates (the AWD model replaces the P85, which started at $93,400 when it was last offered in 2014). With the new lineup and the addition of the Pre-Owned program, current owners may trade up to a newer and more capable Tesla, while shoppers with less to spend are able to get a lower-priced car with a factory warranty — the automaker controls both ends of the market.
Another likely purpose of the Pre-Owned program is to ensure that used Tesla models maintain high resale values, as the automaker is able to set used car pricing — numbers that private sellers will likely follow. An email sent to prospective buyers on May 14 quoted prices starting at $55,000, but most cars will cost more. A scan of the cars available in Chicago revealed a low price of $60,850 for a 2013 Model S 60 with 18,565 miles on the odometer (for comparison, a 2015 S 60 cost $69,900 when new — and it was eligible for the $7500 federal income tax credit). Tesla is selling used P85 models starting at $65,750, for a 2012 model, up to $81,050. Considering how quickly combustion-powered premium luxury vehicles depreciate, those are again some strong numbers.
Control. It seems to be working.